CATESTSERIES.
ORG
CATESTSERIES.ORG
Chapter-4(unit-II)
Income from house property
Q 1: Mr. Mahesh has three flats at Chennai, all the houses were self-occupied, the particulars of
which are provided below
(In Rs.)
Particulars Flat I Flat II Flat III
Municipal valuation 3,00,000 3,60,000 3,30,000
Fair rent (rent which similar property would fetch) 3,75,000 2,75,000 3,80,000
Standard rent 3,50,000 3,70,000 3,75,000
Municipal taxes paid 12% 8% 6%
Date of completion/ purchase 31.03.2021 31.03.2021 01.04.2022
Interest on loan for repairs of property during the _ 55,000 _
current year
Current year interest on loan borrowed in July 1,75,000
2013 for purchase of property
You are required to advice Mr. Mahesh which flats can be treated as self-occupied and the
other deemed to be let out in a manner beneficial to him.
Ans 1:
CATESTSERIES.ORG
Assesse: Mr. Mahesh Previous year: 2022-2023 Assessment year: 2023-2024
A. Computation of income from house property (amounts in Rs.)
[Note: Assuming all the houses deemed to be let-out]
Particulars Flat I Flat II Flat III
Determination of Annual value u/s 23(1)
(a)/(b) / 23 (2) [Note 1]
Step 1: Municipal rent or fair rent whichever is 3,75,000 3,60,000 3,80,000
higher
Step 2: Step 1 or standard rent whichever is 3,50,000 3,60,000 3,75,000
lower
Step 3: Step 2 or actual rent whichever is 3,50,000 3,60,000 3,75,000
higher – since actual rent is not given step 2
value = Gross Annual Value
Less: Municipal Taxes and taxes on services 3,60,000 28,800 19,800
paid [Note 1]
Net Annual value 3,14,000 3,31,200 3,55,200
Less: Deductions u/s 24
(a) 30% of Net Annual value 94,200 99,360 1,06,560
(b) Interest [note 2] _ 55,000 1,75,000
Income / (Loss) from House Property 2,19,800 1,76,840 73,640
CATESTSERIES.ORG
B. Computation of income from house property (Amounts in Rs. Lacs)
Particulars Option I Option II Option III
SOP- Flat 1 Flat 2 Flat 3 Flat 1 Flat 2 Flat 3 Flat 1 Flat 2 Flat 3
assumed
SOP SOP DLOP SOP DLOP SOP DLOP SOP SOP
self-
occupied
DLOP –
assumed
Deemed
Let out
Net Nil Nil 3.55 Nil 3.31 Nil 3.14 Nil Nil
Annual
Value
Less:
deductions
u/s 24
(a) 30% of Nil Nil 1.06 Nil 0.99 Nil 0.94 Nil Nil
Net
Annual
Value
(b) Nil (0.30) (1.75) Nil (0.55) (1.75) Nil (0.30) (1.75)
interest
[Note 2]
Income/ Nil (0.30) 0.73 Nil 1.76 (1.75) 2.19 (0.30) (1.75)
(loss) from
CATESTSERIES.ORG
House
Property
Income / 0.43 0.01 0.19
(loss) from
House
Property
Conclusion: Mr. Mahesh should opt for “option II” treating flat I and III as SOP and Flat II as
DLOP, which is most beneficial, since income form House Property shall be Comparatively
Minimum.
Note:
1. Gross Annual Value for self-occupied property is Nil. Municipal Taxes paid for self-occupied
property shall not be allowed as deduction.
2. For loan taken for the purpose of repairs, interest on housing loan shall be allowed as
deduction u/s 24 up to a maximum of Rs. 30,000 in case of self-occupied property.
Q 2: Mr. Ganesh owns a commercial Building whose construction got completed in June 2021.
He took a Loan of Rs. 15 lakhs from his friend on 01.08.2020 and had been paying interest
calculated at 15% per annum. He is eligible for pre-construction interest as deduction as per the
provisions of the Income Tax Act.
Mr. Ganesh has let out the commercial building at a monthly rent of Rs. 40,000 during the
financial year 2021-2022. He paid municipal Tax of Rs. 18,000 each for the financial year 2021-
2022 and 2022-2023 on 01.05.2022 and 05.04.2023 respectively.
CATESTSERIES.ORG
Compute income under the head ‘house property’ of Mr. Ganesh for the assessment year 2023-
2024.
Ans 2:
Particulars Rs.
Gross Annual value = Actual Rent Receivable (Rs.40,000 × 12 months) 4,80,000
Less: Municipal Taxes (deductible only on actual payment basis, during (18,000)
previous year 01.05.2022)
Net Annual value 4,62,000
Less: Deductions u/s 24
(a) Standard deduction at 30% of net Annual value (1,38,600)
(b) Interest on loan borrowed: current year interest: Rs. 15,00,000 × (2,55,000)
15% = 2,25,000 pre-construction interest at 1/5th of Rs.1,50,000 =
30,000
Income from House Property 68,400
Note:
8
Pre-construction period interest = Rs. 15,00,000 × 15% × (from 01.08.2020 to
12
31.03.2021) = Rs. 1,50,000.
This is deducible in 5 years from PY 2021-2022 onwards. Hence, share of this interest for
PY 2022-2023 = 1/5th.
CATESTSERIES.ORG
Q 3: Mr. Vaibhav owns 5 houses at Cochin. Compute the Gross Annual value of each house
from the information given:
Particulars House-I House-II House-III House-IV House-V
Municipal value 1,20,000 2,40,000 1,10,000 90,000 75,000
Fair rent 1,50,000 2,40,000 1,14,000 84,000 80,000
Standard rent 1,08,000 NA 1,44,000 NA 78,000
Actual rent received/ 1,80,000 2,10,000 1,20,000 1,08,000 72,000
receivable
Ans 3:
Computation of Gross Annual Value
Particulars House-I House-II House-III House-IV House-V
Step 1: Municipal rent or 1,50,000 2,40,000 1,14,000 90,000 75,000
fair rent whichever is
higher
Step 2: Step 1 or standard 1,08,000 2,40,000 1,14,000 90,000 78,000
rent whichever is lower
Step 3: Step 2 or actual 1,80,000 2,40,000 1,20,000 1,08,000 78,000
rent whichever is higher
CATESTSERIES.ORG
Q 4: Two brothers Arun and Bimal are co-owners of a House property with equal share. The
property was constructed during the previous year 1998-1999. The property consists of eight
identical units and is situated at Cochin.
During the previous year 2022-2023, each co-owner one unit for residence and the balance of
six units were let out at a rent of Rs. 12,000 per month per unit. The Municipal value of the
house property is Rs. 9,00,000 and the Municipal taxes are 20% of Municipal value, which were
paid during the year. The other expenses were as follows:
Particulars Rs.
Repairs 40,000
Insurance premium (paid) 15,000
Interest payable on loan taken for construction of house 3,00,000
One of the let- out units remained vacant for four months during the year.
Arun could not occupy his unit for six months as he was transferred to Chennai. He does not
own any other house.
The other income of Mr. Arun and Mr. Bimal are Rs. 2,90,000 and Rs. 1,80,000 respectively for
the previous year 2022-2023.
Compute the income under the head income from house property and the total income of two
brothers for the assessment year 2023-2024
Ans 4:
Assesse: Mr. Arun and Mr. Bimal Previous year: 2022-2023 Assessment year: 2023-2024
CATESTSERIES.ORG
1. Computation of Income from let-out house property (6 units)
Particulars Rs.
Annual value u/s 23(1)(a)/(b): Municipal value of actual rent whichever is
higher
6
Rs.9,00,000 × 8 (OR) Rs.12,000 × 12 months × 6 units, 6,75,000 (or) 8,64,000
(But owing to vacancy in one of the let-out property, the annual value
received with respect to that property is reduced to actual rent received i.e.
8,16,000
Rs. 12,000 × 8 = Rs. 96,000)
[therefore, the Annual value is (Rs.12,000 × 12 moths × 5 units) + Rs.96,000]
6
Less: Municipal taxes paid (20% on Municipal value) [(Rs.9,00,000 × 8) × (1,35,000)
20%)]
Net annual value 6,81,000
Less: Deductions u/s 24: (a) 30% of Net Annual Value (2,04,300)
6
(b) interest (Rs.3,00,000 × 8) (2,25,000)
Income from House Property 2,51,700
2. Computation of Total income of Mr. Arun
Particulars Rs. Rs.
CATESTSERIES.ORG
1. Income from house property – Self occupied, So, Annual NIL
value u/s 22
Less: Deduction u/s 24-interest [W.N.1] (30,000)
Income from self-occupied property (30,000)
Share of income from let-out property (Rs. 2,51,700 ÷ 2) 1,25,850
2. other income 2,90,000
Total income 3,85,850
3. Computation of Total income of Mr. Bimal
Particulars Rs. Rs.
1. Income from house property – Self occupied, So, Annual NIL
value u/s 22
Less: Deduction u/s 24-interest [W.N.1] (30,000)
Income from self-occupied property (30,000)
Share of income from let-out property (Rs.2,51,700 ÷ 2) 1,25,850
2. other income 1,80,000
Total income 2,75,850
Working Notes:
CATESTSERIES.ORG
1. Interest on Loan is Rs. 3,00,000 ÷ 8 units = Rs. 37,500. Since the loan is taken prior to
01.04.1999, maximum allowable interest is only Rs. 30,000.
2. Repairs and Insurance Premium are not allowed as deduction.
3. Municipal Taxes paid is not allowed as deduction while computing income from self-occupied
property.
Q 5: Mrs. Rohini Ravi, a citizen of the USA is a Resident and ordinarily Resident in India during
the previous year 2022-2023. She owns a house property at los Angeles, U.S.A. which is used as
her residence. The annual value of the house is $ 20,000. The value of 1 USD ($) may be taken
as Rs. 65. she took ownership and possession of a flat in Chennai on 01.07.2022, which is used
for self-occupation, while she is in India.
The flat was used by her for 7 months only during the year ended 31.03.2023. Whilst the
Municipal valuation is Rs. 32,000 p.m., the fair rent is Rs. 4,20,000 p.a. she paid the following to
corporation of Chennai – property Tax Rs. 16,200 and sewerage Tax Rs. 1,800.
She had taken a loan from standard Chartered Bank for purchasing this flat. Interest on loan
was - Rs.
Period prior to 01.04.2022 49,200
01.04.2022 to 30.06.2022 50,800
01.07.2022 to 31.03.2023 1,31,300
She had a house property in Bangalore, which was sold in March, 2023. In respect of this house,
she received arrears of rent of Rs. 60,000 in March, 2023. This amount has not been charged to
tax earlier.
CATESTSERIES.ORG
Compute the income chargeable from house property of Mrs. Rohini Ravi for the assessment
year 2023-2024, exercising the most beneficial option available.
Assesse: Mrs. Rohini Ravi Previous year: 2022-2023 Assessment year: 2023-2024
Computation of income from house property
Particulars US Prop. SOP Indian Prop.
Rs. SOP Rs.
Net annual value (Refer Note 2) Nil Nil
Less: deductions u/s 24
(a) 30% of net annual value _ Nil
(b) interest on borrowings (Refer Note 3) _ (1,91,940)
Income from house property (A) Nil (1,91,940)
(before considering arrears of rent) (1,91,940)
Arrears of Rent received (Refer Note 4) 60,000
Less: deduction u/s 25A = 30% of arrears (18,000)
received
Net Arrears of Rent (B)
42,000
Net income from house property (A+B) (1,49,940)
Notes:
1. Since Mrs. Rohini Ravi is a resident in India, her global income is taxable in India.
CATESTSERIES.ORG
2. She possesses a self-occupied property at Los Angeles and Chennai. She is eligible to take
benefit of nil annual value for both the properties.
3. Deductions for interest on capital borrowed:
Prior period interest = 49,200/5 = Rs. 9,840 (assuming conditions u/s 24 are satisfied)
Interest for the Indian property = 9,840 + 50,800 + 1,31,200 = 1,91,840
If the Indian property is considered as self-occupied, deduction for interest is restricted to
Rs. 2,00,000
4. Arrears of rent w.r.t Bangalore house shall be chargeable to tax in the year of receipt u/s
25A. It is not essential that assesse should continue to be the owner.
CATESTSERIES.ORG
